“Money, like emotions, is something you must control to keep your life on the right track.” ― Natasha Munson

Knowing whether you have an investor or trader mindset is a really important aspect of ensuring that you are satisfied with your financial plan and goals. Discover the fundamental principles that underpin effective investment planning. In the latest GWM video, we explore the importance of setting clear financial goals, understanding risk tolerance, and crafting a well-defined investment strategy tailored to your unique circumstances. Financial growth and security can really only happen when you know yourself fully. Take a watch and let us know what you think!


Hi, there. Mike Brady with Generosity Wealth Management, a comprehensive, financial services firm here in Boulder, Colorado.

Today I want to talk about investment management and planning. One of the first questions to start with is are you a trader or are you an investor.

Before I really talk about that and how that flows out into our planning, there’s this great book called A Conflict of Visions by Thomas Stowell, who is this famous economist. He’s now in his 90s, and what he said is when you have a disagreement with somebody whether it’s political, religious, it doesn’t really matter, you’ve got to think of it like a tree. You’ve got a tree. You look at my hands and the root of the tree is here and then branches come out. There are all these decisions – a decision matrix. If you’re disagreeing way up here at the top level, the top leaves you’ve got to go back down the tree, down the limbs to where you might have had a conflict division, where you might disagree. We agreed all the way up to here and now we disagree and that disagreement from a philosophical point of view then has repercussions all the way out here like that.

I think of the same process when it comes to investment management and planning. Are you a trader or are you an investor? Very key. An investor is someone who purchases something, purchases an investment, assumes the investment will be greater in the future and knows that there will be ups and downs along the way, but makes very few changes to that along the way.

A trader, on the other hand, is very actively managing saying wow, I want to buy this stock, that stock, this mutual fund. They want to time the market, they believe that now is the time that the market is going down so I want to move over to cash. Very actively managing it. That is a trader and a trader mindset. A lot of the uncomfortable, the displeasure, in the future is when you say that you’re an investor, you’ve set things up like an investor but then you have a trader mindset. That might be your tendency and your bias.

Once you decide whether you’re a trader or you’re an investor, then you have to decide do I take individual business risk or do I not. That means individual stocks. Do you buy a certain company and be very specific to it or do you buy that broad sector, do you buy the broad market? You could by in the automotive sector and be very heavy in that versus an individual automotive stock. Or do you buy the market as a whole, the S&P 500, the international unmanaged stock market index. It’s really a philosophy of in addition to market risk do you take individual business risk.

That is a very key ingredient and once you’ve decided that, then the question is how do you do that? Do you do that through the various ways like mutual funds? Do you do it through separately managed accounts? Do you do it through ETFs, all of which require a very detailed video to describe some of the pros and cons in each. All of them can be not necessarily good or bad. It’s just a preference. What’s better, a sports car or a truck? Well, neither of them. It depends on what the purpose is. It depends on the individual as well. It’s the same way with your particular investments.

One of the most important decisions as well is are you a believer in mathematics, the CAPM, the Capital Asset Pricing Model, meaning that “hey, I can figure out where the value of this and market is or this particular stock and that’s what it’s either overvalued or undervalued”, or are you more of a behavioral finance person believing that the market is filled with human beings who are emotional and sometimes make irrational decisions. That’s a very key decision to ask yourself and to think about. And of course to talk with your financial advisor to say “hey, what do you think? What’s your philosophy on all of these various aspects?” They are important to craft a portfolio that you’re going to be happy with.

The most important thing is that not that every single day, month, quarter or year is happy for you, but that you’re able to survive it. I think of it like a marriage. When you get married you know that there’s going to be some disagreements and not every single day is going to be sunshine and roses. But, of course, there’s more days that are good than are bad and that you know hey, I can weather this and this is for the long-term good and I’m a better person because I’m mashed up with this other individual in this thing we call marriage. It’s no different with investments. You’ve got to stick with what the plan is that you’ve got and that’s where good investment management comes into play.

Warren Buffett says that bear markets transfers money from the impatient to the patient. Whether you’re a trader or an investor, whether or not you believe in individual business risk or individual market risk or how these things come together. The most important thing is to be patient because even if you’re a trader buying and selling and doing all this other stuff there is a streak that’s going to happen at some point that is not in your favor and you’ve got to weather that as well.

I believe in taking individual market risk but not business risk. I believe in a more passive approach being an investor and not a trader. I believe in many other things that help, but I guide that with my clients.

If you want to talk about investment management and planning and the thought process behind it I’m always happy to talk about my philosophy and how it might work for you. If you’re my existing client or if you’re not how it might fit with your individual situation. Mike Brady, Generosity Wealth Management, 303-747-6455. Thanks.